As urban growth occurs over time, a situation often arises where major arterial routes, especially freeways, become the hub of an infrastructure such that the immediately surrounding land is seen as best suited for developments such as high rise office towers, apartments, shopping centers and other commercial uses. Special zoning is often established for these "preferred development districts".
Urban planners recognize that the land use in a preferred development district is typically a mix, including many business that have been at the same location for years and that don't require the new infrastructure. Such businesses will be referred to as "land-and-one-story businesses", because their operation can typically be most economically conducted using land and one story buildings. Although at some point the business owners may realize the benefit from their land value appreciation, the overall land value appreciation in a preferred development district may actually do land-and-one-story business owners more harm than good, for the following reasons. First, it is often difficult to gain approval for improvements to property in a preferred development district. Because everything on a property will typically be leveled when a development project is undertaken, development authorities do not want to authorize nontransferable improvements because they will drive up the cost of property for developers, delaying preferred development. Second, land-and-one-story business owners are often faced with limited or no possibility of expansion at their current location, due both to the high cost of adjacent land, and due to restrictions placed on land use in preferred development districts.
If a land-and-one-story business decides to relocate, the business may find that their current property is of low overall market value, for the following reasons. First, the constraints described above will be faced by any new owner. Second, many people are reluctant to locate a business on property that may be absorbed into a large development project at any time. Third, because the properties of many land-and-one-story businesses have odd, irregular buildings, often built for a specialized purpose, often with a variety of aesthetic, code and regulatory problems, and often with a high percentage of open land, the total rental income such properties can generate is often relatively low, even if rental income per square foot for uses such as warehouse is relatively high. Because redevelopment may not occur for a decade or more, low rental value will significantly depress the market value of a land-and-one-story property.